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Senate amendment to financial regulation bill addresses five federal watchdogs

By Ed O'Keefe
Washington Post Staff Writer
Thursday, May 20, 2010; B03

Senators approved an amendment to the financial regulation bill Tuesday night that keeps federal watchdogs at five financial regulatory agencies from becoming presidential appointments.

The five -- at the Federal Reserve Board of Governors, the Commodity Futures Trading Commission, the National Credit Union Administration, the Securities and Exchange Commission, and the Pension Benefit Guaranty Corp. -- campaigned for the Senate amendment, arguing their work would be compromised by partisan politics and the election cycle if the president could hire and fire them.

Congressional Republicans have said they are especially concerned for SEC Inspector General H. David Kotz, who is investigating the agency's decision to file fraud charges against Goldman Sachs at their request.

The Senate's 75 to 21 vote to make the five IGs accountable to an agency's commissioners instead of just the agency chief puts it at odds with the House financial reform bill.

The bill includes a proposal by Rep. John Larson (D-Conn.) to elevate the five watchdogs to the presidential appointment level.

In the Senate's measure, removing a watchdog would require the approval of two-thirds of commissioners, who would have to provide a reason for the dismissal to Congress in writing.

At least 69 federal inspectors general investigate allegations of government corruption and personnel matters. Approximately 30 of the positions are presidential appointees while the rest are hired by the heads of smaller, independent agencies.

The amendment was introduced by Sens. Claire McCaskill (D-Mo.) and Charles E. Grassley (R-Iowa), two longtime advocates for federal inspectors. The amendment would keep watchdogs from developing "cozy relationships" with their agency boss, McCaskill said.

Larson, however, has said his proposal would hold the five watchdogs to a higher standard and make them more accountable to the White House and Congress.

But Grassley said the Larson plan "could introduce politics into what has traditionally been career, nonpolitical positions." McCaskill said it would needlessly add five more officials to the hundreds that currently require Senate approval.

"I certainly don't want the IGs for these agencies to be held up with secret holds over the next couple of years and us to have a lack of continuity and uncertainty," she said.

According to a recent study by the Center for Public Integrity, 15 of the 73 federal watchdog positions are vacant partly because of the slow Senate confirmation process.

"My position would become a political one and my status would be that as a lame duck until a new inspector is appointed," Kotz said in an interview.

William DeSarno, inspector general at NCUA, said his agency is too small for a presidential appointee.

"I just don't think that would be a good idea to bring in a presidential appointee to supervise a staff of nine people and add the political environment on top of what we're trying to do here," he said.

PBGC Inspector General Becky Batts said the McCaskill-Grassley measure does more to ensure their independence by requiring the agencies to give cause for dismissal.

"Requiring that a majority of the board concurs in the decision might protect IGs against one person who might be upset," she said.

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